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2. Making the Most out of the RATE Filing Process
3. Making the Most out of the RATE Filing Process Overview
General Information on Rate Regulation
What needs to be filed?
What happens to my rate filing?
Information for SERFF filers
What does TDI look for in a Rate Filing?
Related Topics:
Underwriting Guideline Filings
Credit Scoring Model Filings
Wrap up
4. General Information on Rate Regulation Primary Statutes:
TIC Chapter 2251 (formerly Article 5.13-2)
Applicable to Most Lines of Business:
General Liability
Residential & Commercial Property
Fidelity and Surety
Commercial Multi-peril
Personal and Commercial Auto
Etc..
File and Use
5. General Information on Rate Regulation Primary Statutes:
TIC Chapter 2053 (formerly Chapter 5, Subchapter D)
Workers’ Compensation
File and Use
6. General Information on Rate Regulation Primary Statutes:
TIC Chapter 3502 (formerly Article 21.50)
Mortgage Guaranty
Mortgage Guaranty Pool
File …. and then use
“at least 15 days before they are to become effective”
7. General Information on Rate Regulation Filings Made Easy Rule
Texas Administrative Code (TAC) §§5.9310 - 5.9357
http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=5&ti=28&pt=1&ch=5&sch=M
Filings Made Easy Guide
http://www.tdi.state.tx.us/pubs/pc/pccpfme1.html
8. What needs to be filed? All rates, rating manuals, supplementary rating information, fees and additional information as required.
Other filings:
Forms/endorsements – may be combined with “rates”
Underwriting guidelines – must be filed separately
Credit Models – must be filed separately
9. What needs to be filed? All rates, rating manuals, supplementary rating information, fees and additional information as required.
Additional information includes:
Filing documents (transmittal, cover letter, etc.)
Filing description (Exhibit C, explanatory memo, etc.)
Other supporting Information “as appropriate to the filing” (Exhibits D, E, L, actuarial indications, support for new rating factors, support for use of credit information, support for the “15% rule”, etc.)
10. What needs to be filed? Example 1:
Personal Auto rate filing for a large base rate increase varying by territory.
-Company filed the following: revised rating manual, transmittal, cover letter (providing overview of filing), Exhibit C (rate change exhibit), D (loss and premium history), E (expense history) and L (profit provision), actuarial indications and actuarial memorandum.
-Company will be asked for support for increases by territory.
11. What needs to be filed? Example 2:
Commercial lines rate filing for a minor rating rule change.
Company filed the following: Manual page, cover letter (providing overview of filing and commentary on basis for rates), and Exhibit C (rate change exhibit).
- Transmittal! Filing may be rejected without it.
- Otherwise sufficient in many cases.
- Clarifications or additional support may be requested if commentary is insufficient basis for change.
12. What happens to my rate filing?
13. What happens to my rate filing? Rate filing received by Intake Unit.
Intake Unit sends acknowledgement letter to company and rate filing to P&C Actuarial. (Combined rate/form filings receive an acknowledgement from the form technician.)
P&C Actuarial assigns filing to appropriate actuarial staff depending on the line of business.
Staff reviews rate filing for compliance.
14. What happens to my rate filing? If necessary, staff communicates with the company to gain clarification on proposed changes or to obtain additional support.
At some point, usually after staff finishes their review, they send the filing to be scanned.
15. What if I use SERFF? Key Facts:
Although TDI does accept rate filings via SERFF, actuarial staff does not currently process filings in SERFF.
SERFF in Texas is a supplemental filing system and not the Department’s primary filing tracking system.
Rate only filings are acknowledged and closed in SERFF immediately by intake staff before forwarding to actuarial for review.
16. What if I use SERFF? Key Facts (continued):
The filing status in SERFF is not intended to be representative of the filing status in TDI’s tracking system.
Companies are requested to send any additional correspondence initiated by the company via email or mail.
The SERFF filing can be reopened for updates and correspondence upon request (512 475 3017 or pcactuarial@tdi.state.tx.us).
17. What if I use SERFF? Rules, rates, forms and supporting information
Q. Where does TDI prefer I place my attachments?
A. As follows:
“Form Schedule” Tab - Policy forms and endorsements
“Rate/Rule Schedule” Tab – Rate manuals, Texas exception pages, etc. Please fill this section out completely and accurately.
“Supporting Documentation” Tab – Cover letters, memorandum, side-by-sides, actuarial support, TDI exhibits, etc.
18. What if I use SERFF? Revisions of Rate information through SERFF
Q. For companies that submit their rate manuals as a single large pdf document, how are revisions preferred?
A. If only a few pages are revised, please submit only those revised pages with your response letter (rather than the entire document). This may differ from SERFF’s general recommendations.
19. What if I use SERFF? Public access / request for confidentiality
Q. Why can’t I mark my submission as “Confidential” in SERFF.
A. Texas does not utilize the public access feature of SERFF. As a result, how a submission is designated in SERFF is immaterial.
Additionally, TIC §2251.107 specifies:
Each filing made, and any supporting information filed, under this chapter is open to public inspection as of the date of the filing.
20. What if I use SERFF? Delayed inquiries
My SERFF filing was closed a month ago, why am I getting an “after our initial review…” letter now?
Current TDI procedure is for intake staff to close rate filings in SERFF system immediately upon receipt and acknowledgement. As noted in the “Note to Filer”, this does not mean that a filing has been reviewed by actuarial staff.
21. What does TDI look for in a Rate Filing? What?
Why?
How does it impact your policyholders?
22. What does TDI look for in a Rate Filing? What?
Description of proposed changes.
Why?
Rationale for proposed changes.
Support: Historical premium/loss data, actuarial indications, loss ratio analysis, pure premium analysis, competitive analysis, etc.
Assumptions used in catastrophe models.
Information to understand loads based on the cost of reinsurance.
Pricing considerations due to changes in coverage provided.
23. What does TDI look for in a Rate Filing? How does it impact your policyholders?
Rate impact and rate change history.
Information on the “disruption” of rate changes and number of affected policyholders.
Present rates, proposed rates, percent changes, premium or policy count distribution.
24. What does TDI look for in a Rate Filing? Why does TDI keep asking me all these questions?
To understand what is being proposed, the rationale for the change and support for the change.
To ensure filings comply with statutes and rules.
To ensure changes in coverage have been considered in pricing.
To clarify rating rules and information on rate pages.
To understand the filing well enough to explain it to interested parties, including senior management, consumers, and legislators.
25. What does TDI look for in a Rate Filing? You might be the recipient of a question if…
you file a rating element that we’re unfamiliar with.
you file a new rating methodology.
your territorial analysis consists entirely of the phrase “competitive considerations”.
you file for a significant rate increase without actuarial support.
OPIC has raised concerns about the filing.
26. Pop quiz Traffic Violations
TIC Article 5.01-1 (recodified to §1953.051 effective 4/1/2009)
Prohibits use of “traffic violations” for Automobile Insurance
may not:
(1) assign a rate consequence to a charge or conviction for a violation of Subtitle C, Title 7, Transportation Code; or
(2) otherwise cause premiums for automobile insurance to be increased because of a charge or conviction described by Subdivision (1).
Personal, Commercial and miscellaneous vehicles
27. Pop quiz Schedule Rating
Acceptable rating practice for Commercial Lines
+/- 40% is the generally acceptable range.
28. Pop quiz Transition Plans
When implementing new rating plans that might otherwise result in large rate swings for individual policyholders, transition plans are encouraged to avoid market disruption.
29. Pop quiz Use of Credit Scoring in rating
File Credit Model before utilizing it.
Rating factors must be actuarially justified.
Factors/rules/guidelines that specify how the output of the model is used should be in Rate or Underwriting Guidelines filings as appropriate.
TAC §§5.9440-41
30. Pop quiz ZIP Code Rating
For Personal Auto and Residential Property,
List of subdivided counties required (see FME sample Exhibit 1)
Actuarial justification is required (see FME sample Exhibit 2)
TIC §2253.051
TAC §5.9960
31. Pop quiz Fees
All policy fees, service fees, and other fees that are charged or collected by the insurer under §§4005.001 - 4005.003 or §550.001 of the Texas Insurance Code must be filed.
Income from these fees should be explicitly considered in rate indications.
32. Pop quiz Exclusions for asbestos, lead, silica and
punitive damages
Insurers must provide either a rate credit or actuarial justification for why a rate credit is not appropriate when coverage is reduced due to these exclusions.
33. Pop quiz Prior Insurance (Private passenger auto)
“Insurers may not use an applicant's lack of prior insurance in determining the appropriate rate for private passenger automobile liability insurance where such applicant has not been operating an uninsured motor vehicle in the state for more than 30 days.”
Applicants “will be underwritten without consideration of the applicant's prior insurance carrier”
Notification may be required if quote equals or exceeds TAIPA premium
34. Pop quiz Use of claims (Residential Property)
These cannot be considered in rating (Discounts, Surcharges, Tiering, etc.):
“Natural Cause” claims,
“Zero paid” claims, and
Certain properly remediated appliance related water claims
Surcharge programs cannot begin until the 2nd chargeable claim.
Properly remediated mold claims cannot be considered for underwriting.
Underwriting shall not be based solely on a single prior water damage claim.
For reference:
TIC Chapter 544 Subchapter H (formerly Art. 5.35-4) - TAC §21.1004
TIC §551.107 (formerly Art. 21.49-2B) - TAC §21.1007
TIC Chapter 2006 Subchapter B (formerly Art. 5.43)
35. Pop quiz “Refer to company” or “(a)” rates
Not permissible.
All rates should be filed before they are used (TIC Chapter 2251).
Rating plans, such as “large risk” rating plans are allowed.
36. Pop quiz Workers' Compensation Relativities
The previous relativities expire on the effective date of the new relativities and can no longer be used.
An insurance company may not make a rate filing more frequently than once every 6 months. However filings that exclusively adopt new relativities are not considered rate filings.
37. Pop quiz Disallowed Expenses
TIC §2251.002 defines certain expenses, such as lobbying and damages in bad faith claims, as disallowed.
Applies to all lines subject to TIC Chapter 2251.
Certain administrative (general) expenses are capped at no more than 110% of the industry median.
Industry 110% figures can be found here:
http://www.tdi.state.tx.us/commercial/pcflxrt.html
38. Related Topics: Underwriting Guideline Filings FME Rule and Guide provide underwriting guideline filing requirements for personal automobile and residential property insurance pursuant to TIC §38.002, and for workers’ compensation pursuant to TIC Chapter 2053 Subchapter A-1 (formerly Art. 5.55A).
A complete copy is required once every 3 years (March 2007, March 2010). Update filings are accepted in the intervening years.
Underwriting guidelines for other lines are required only upon request, pursuant to TIC §38.003.
Underwriting guidelines should be filed separately from other filings.
39. Related Topics: Credit Model Filings FME Rule and Guide provide filing requirements for credit scoring models.
Insurers using credit scores to underwrite and rate risks shall file their credit scoring models or other credit scoring processes with TDI.
Filing requirements apply to insurers writing personal insurance coverage as defined by TIC Chapter 559 (formerly Art. 21.49-2U).
Credit scoring model filings must be made separately from all other filings.
Rates or rating factors based on credit scoring should be included in a rate filing.
Credit scoring models are public information!
40. Wrap up: Web Resources Filings Made Easy Guide:
http://www.tdi.state.tx.us/pubs/pc/rspceasy.html
List of Recodified Statutes:
http://www.tdi.state.tx.us/pubs/pc/pccpfme1a.html#recod
Texas Insurance Code (TIC):
http://tlo2.tlc.state.tx.us/statutes/in.toc.htm (recodified)
http://tlo2.tlc.state.tx.us/statutes/i1.toc.htm (not codified)
Texas Administrative Code (TAC):
http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=2&ti=28
41. Wrap up: Contact information Property & Casualty Actuarial Division
42. Wrap up:
